Policy Statement on Licensing Negotiations and Remedies for Standards-Essential Patents Subject to F/RAND Commitments

The USPTO has joined forces with the Department of Justice (DOJ) and National Institute of Standards (NIST) in creating a new draft policy statement on licensing of standards-essential patents (SEP) subject to voluntary F/RAND commitments.  The draft seeks further public comments.

The 2021 follows a long history of policy discussions on competition implications of patents in the standards market.

In 2013, a statement indicated that an “exclusionary remedy … may be inconsistent with the public interest” for F/RAND licensed patents.   The 2019 statement rejected that approach and instead explained that a F/RAND commitment should not “bar any particular remedy.”  The new proposal reverts back to 2013 and goes further — indicating that a patent holder who commits its patent as part of a standard-setting negotiation is making a promise that “it will not exercise any market power obtained through standardization.”

Opportunistic conduct by SEP holders to obtain, through the threat of exclusion, higher compensation for SEPs than they would have been able to negotiate prior to standardization, can deter investment in and delay introduction of standardized products, raise prices, and ultimately harm consumers and small businesses.

2021 Draft Statement.  At the same time, the new statement also indicates that implementers must also participate in good faith.

Regarding injunctive relief, the 2021 proposal interprets eBay and Federal Circuit holdings as follows:

Where a SEP holder has made a voluntary F/RAND commitment, the eBay factors, including the irreparable harm analysis, balance of harms, and the public interest generally militate against an injunction.

2021 Statement.

Comments due first week of January 2022 via regulation.gov. The agencies propose the following questions to spur comment:

  1. Should the 2019 Policy Statement on Remedies for Standards-Essential Patents Subject to Voluntary F/RAND Commitments be revised?
  2. Does the draft revised statement appropriately balance the interests of patent holders and implementers in the voluntary consensus standards process, consistent with the prevailing legal framework for assessing infringement remedies?
  3. Does the draft revised statement address the competition concerns about the potential for extension of market power beyond appropriate patent scope identified in the July 9, 2021 Executive Order on Promoting Competition in the American Economy?
  4. In your experience, has the possibility of injunctive relief been a significant factor in negotiations over SEPs subject to a voluntary F/RAND commitment? If so, how often have you experienced this?
  5. Are other challenges typically present in negotiating a SEP license? If so, what information should be provided or exchanged as a practical matter to make negotiation more efficient and transparent?
  6. Are small business owners and small inventors impacted by perceived licensing inefficiencies involving SEPs? If so, how can licensing be made more efficient and transparent for small businesses and small inventors that either own, or seek to license, SEPs?
  7. Will the licensing considerations set forth in the draft revised Statement promote a useful framework for good-faith F/RAND licensing negotiations? In what ways could the framework be improved? How can any framework for good-faith negotiations, and this framework in particular, better support the intellectual property rights policies of standards-setting organizations?
  8. What other impacts, if any, would the draft revised statement have on standards-setting organizations and contributors to the standards development process?
  9. The draft revised statement discusses fact patterns intended to indicate when a potential licensee is willing or unwilling to take a F/RAND license. Are there other examples of willingness or unwillingness that should be included in the statement?
  10. Have prior executive branch policy statements on SEPs been used by courts, other authorities, or in licensing negotiations? If so, what effect has the use of those statements had on the licensing process, outcomes, or resolutions?
  11. Are there resources or information that the U.S. government could provide/develop to help inform businesses about licensing SEPs subject to a voluntary F/RAND commitment?

5 thoughts on “Policy Statement on Licensing Negotiations and Remedies for Standards-Essential Patents Subject to F/RAND Commitments

  1. 3

    A SEP (as a concept) suggests that a separate class of patent could be helpful where future exclusion is a penalty for uncompensated infringement, but not a right of the patentee upon issue. This is especially relevant when the economic value of the covered IP proportional to the total saleable unit is very small. A standard is a good example of something non-obvious but not “inventive” (the standard is arbitrary) but where there still is a free-rider problem for people using the standard, but doing no work to create or maintain it.

  2. 2

    As a practical matter, the Sup. Ct. eBay decision’s enforcement of the patent statute on injunctions had already meant that a PAE asserting an SEP patent was unlikely to get a product injunction anyway, while a company suing a competitor on an SEP patent where both were competitively making or selling the subject product might.
    But there is another possible type of injunction in these SEP cases, such as ordering supervised good faith FRAND licensing negotiations.

    1. 2.1

      As a practical matter, it would be good for all involved to understand just what a patent is (a negative right) and just what a patent is not (a positive ability to MAKE a product).

      But why let such reasoning intrude on ‘policy?’

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